On September 29, 2015, the D.C. Circuit Court of Appeals ruled that the National Environmental Policy Act (NEPA) did not require federal agencies authorizing portions of an interstate oil pipeline project to conduct a “whole-pipeline” environmental review.  The case, Sierra Club v. U.S. Army Corps of Engineers, et al.,  clarifies the appropriate scope of NEPA review for oil pipeline construction projects where federal involvement is limited to granting authorizations for discrete aspects of the project.

Sierra Club brought the case to challenge the fact that none of the federal agencies involved in authorizing various aspects of Enbridge’s Flanagan South pipeline project had conducted a NEPA analysis of environmental impacts related to construction of the entire pipeline, a 593-mile long pipeline designed to ship about 600,000 barrels of oil per day across Illinois, Missouri, Kansas, and Oklahoma.  NEPA requires federal agencies to analyze the environmental impacts of their proposed actions, including the issuance of permits or other authorizations to private parties, and to prepare and make publicly available, for any “major Federal actions significantly affecting the quality of the human environment,” a statement of the anticipated environmental effects of the action and any alternatives that might reduce adverse effects.

In the case of the Flanagan South pipeline, various federal actions triggered NEPA analysis, including grants of easements to cross federal lands, verification that the project could be covered under the Clean Water Act (CWA) Section 404 Nationwide Permit, and the issuance of an Incidental Take Statement absolving the project of liability under the Endangered Species Act.  Sierra Club argued that these actions gave the necessary “go-ahead” to Enbridge to build the pipeline as a whole, and thus the entire project should have been subject to environmental scrutiny under NEPA.

The Court rejected Sierra Club’s argument, however, finding that because these approvals required only consideration of discrete geographic sections of the pipeline (which comprised less than five percent of its overall length), the federal agencies involved were not required to conduct NEPA analysis of the entire pipeline, including those portions not subject to federal control or permitting.  The limited geographic scope of each of the agencies’ jurisdiction over the project was an important factor in the decision, and the Court emphasized that the ruling was limited to the particular facts of the case.  The Tenth Circuit has taken similar view, however, in a case involving a different oil pipeline project.  See Sierra Club v. Bostick, 787 F. 3d 1043 (10th Cir. 2015) (finding that the U.S. Army Corps of Engineers was not required to prepare an environmental analysis for the entirety of TransCanada’s Gulf Coast pipeline before issuing CWA Section 404 Nationwide Permit verification letters).

The ruling highlights a difference between the processes for permitting and authorizing interstate oil and interstate natural gas pipelines.  There is no central permitting authority for oil pipelines, resulting in the issuance of individual agency approvals of discrete aspects of a project, as discussed in the Sierra Club case.  In contrast, interstate natural gas pipelines are subject to overall approval by the Federal Energy Regulatory Commissions (FERC), which conducts NEPA environmental review of the entirety of a proposed gas pipeline in determining whether to issue a Certificate of Public Convenience and Necessity.  No such “overall” permit is required for oil pipelines, and agencies therefore tend to conduct NEPA review only of the segment that their permitting action or other authorization covers.